The UK’s Misguided Embrace of AI Hype w/ James Meadway

0:00 There is a basic problem about us not really thinking seriously about what we're doing with all these computers we're insisting on building.

0:42 And I do think it's a really interesting interview. Maybe you have heard, but since the UK Labor Party came back to power last year under the leadership of Keir Starmer, it has really embraced AI and this notion that the UK should be a leader on AI and should be adopting these various policies to make sure that it is keeping these AI and tech companies happy, regardless of the cost.

1:07 And so I wanted to explore with James why that is and what the wider repercussions of these decisions are in the United Kingdom, which is obviously, you know, struggling economically and has been since the Brexit decision all those years ago. But there was also something else that I wanted to explore in this conversation, which is, you know, this notion that the United States has all of these major tech companies.

1:31 So many of these countries in Europe or Canada or Australia are dependent on those tech companies. And so then what is the economic impact of allowing the United States to control so many of these dominant firms for the other economies that often consider themselves allies of the United States? I think we're in a time right now where people are reconsidering that dependence, right?

1:57 And if it really makes sense to allow American companies to so overwhelmingly dominate the digital sphere. And knowing those consequences is one part of having that discussion and deciding on a different policy and a different approach to what is actually going on here. So, with that said, I had a really fantastic time talking to James.

2:18 You know, I really enjoy listening to his podcast to learn about his economics perspective on things. And I think you're really going to enjoy it as well. If you do, make sure to leave a five-star review on your podcast platform of choice. You can share the show on social media or with any friends or colleagues who you think would learn from it.

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2:57 Thanks so much and enjoy this week's conversation. James, welcome to Tech Won't Save Us.

3:02 Nice to finally get here after some false starts and some attempts to make the interview happen, then like not, but yeah, we we've been working to try to find a time for, I guess, a few months now to finally have you on the show.

3:13 But I think it's okay that we waited because things have continued to develop. And so we even have more to dig into now, right? Of course, you know, you host the Fantastic Macrodose podcast, which I find is a great resource to like understand what is going on in the world through, you know, your left-wing economics lens.

3:28 So I feel like I learned a lot from listening to it.

3:30 Thank you. Yourself and various other people who are more kind of critical of tech, I think it'd be an essential like listening or reading over the last few years, as gradually this sector has come to sort of consume everything. We'll get into this, including sort of not quite entire governments, but but certainly governments desperate to look like they're doing something by sucking up to US big tech is basically what it comes down to.

3:50 Yeah, and sadly, you know, too many governments end up doing that. Of course, you're in the UK, and the UK seems to be really standing out for doing that right now. Based on what I've been seeing, it looks like the UK and Keir Starmer's Labour government seems to be going all in on AI. They're talking about it constantly, they're rolling out these plans for how they are going to attract AI investment and all this stuff.

4:10 What is driving that? Why are they so obsessed with this technology in this sector and this kind of recent development in the tech industry?

4:17 I mean, look, the the short answer is a kind of desperation. The slightly more developed answer is that it sits exactly at the intersection of two things they desperately want to happen now. And you can see this, it was already there, right? It was already becoming an issue. I was at Labour's conference last year, up in Liverpool, party conference, you know, which under under the Corbyn years was a very different beast, really, and is now quite a world transformed, you might say, in terms of like who's there and what's going on, the presence of big tech and uh of data and an obsession with the data economy in generally, and and uniformly presented, you know, uncritically, like various sort of

4:51 fringe events you go to. It's just like this is all great, let's do loads of it. So it was already happening, I think, that this was a government that was significantly aligned with the demands of big tech and US big tech in particular. What's happened since Christmas is that first their their big thing about we're going to get economic growth just isn't happening.

5:08 I mean, it wasn't likely to for a whole stack of reasons, and it really is not, and things are pretty much going backwards on that one. So that started a real panic.

5:15 And I guess to be clear there, like the Starmer government and Rachel Reeves, you know, the the Chancellor of the Exchequer. Right, thank you. Their whole kind of narrative, taking over the government, you know, beating the conservatives was like growth, growth, growth at all costs, right? And and they were going to return the UK to growth because we've seen these years of sluggish growth with Brexit and these other headwinds.

5:35 And so they were promising that, you know, this agenda they were going to bring in, feeling very conservative like was going to be all about growth, was going to revive the economy. And what you're saying is that's not really happening, right?

5:45 No, no, not all. I mean, look, you you can make the generous case and say, well, we're only six months in. I mean, this is the government's case. It'll take a while to turn the oil tanker around or whatever. But at this point, it's like you're kind of turning in the wrong direction. I mean, the recent sort of sort of this surprise that the most recent GDP figures showed we had just avoided a recession.

6:03 We're kind of coasting along at the bottom somewhere. I mean, worst performer in the G7 uh on GDP terms by some distance by this point. And it's obviously not working by around about January this year. And that's coupled with Donald Trump coming back to the White House, even though this is predictable for about a year at least before the election, let's be honest, right?

6:20 Even removing Biden, this sort of thing didn't actually materially change the polls enough to think that anything really would shift. Yeah, even though we really hoped that it would. Oh yeah, no, I mean, look, we were also coming on to these bits and pieces, that sudden apparent polling surge a weekend out, this sort of thing.

6:34 Okay, fine. You think maybe something will shift, but no, not really. Given that you've got this delay between the election and him actually being the White House, just like three months, you think that's enough time to sort something out. But it seems fairly clear there's like a degree of panic just because he's there.

6:47 And like, this is completely unexpected, all the things he's doing, even though he's telegraphed it years in advance that this is what he will do if he becomes president again. And lo and behold, he's running through, speed running through it, really. So there's this desperate urge just in terms of Britain's international position, post-Brexit, especially.

7:02 So kind of a historic thing of sucking up to America in place since the 1950s, since the Suez crisis. You just sort of double down on that, and and to an embarrassing extent in terms of what Keir Starmer's sort of trying to do at the minute. Put those two things together, and there's one place, one part of the economy that's like both of these things arriving at the same time.

7:20 Because it says you can have growth, and this is what Donald Trump and the people around him are really concerned with. So you go, big data, US tech, this is what we're gonna do. You get everything you want, we're gonna bang on about this, we're gonna be the place in Europe that does all of this. So it's it's just perfect for a kind of desperate government in the situation that the Starming government finds itself in.

7:38 There's no way they're not going to do this. They won't think outside of any boxes at all, ever, right? It's just constitutionally not what they're capable of. So they're going to go for this and they're going to go for it in a big way.

7:47 I want to dig into that a little bit more, but I want to pick up on that relationship with the Trump administration too, right? Because I feel like that has really stood out to me. We've seen Trump levying these attacks against allies like Canada or Mexico, and I feel like we haven't really heard much from the UK government about that, despite the kind of historical relationship with Canada, obviously, you know, being part of the Commonwealth and the former British Empire.

8:09 And then, of course, there was this AI Action Summit in France where there was this memorandum after the UK and the US did not sign on to it. And it seemed like the UK was potentially worried about pissing off the US if it signed on to this document. And it seems like time and again, Keir Starmer is not, and you know, the Labour government is not speaking out on these things that the Trump administration is doing.

8:26 People are noticing that that is happening. It seems very clear that despite this being a Labour government, that they are willing to cozy up to whatever this Trump administration is going to be, because as you say, you know, the North Star is growth above all else.

8:38 Well, it's growth above all else. And like, what is Britain's role in the world post-Brexit and with everything else that's happening? A whitehole class, uh, a sort of ruling caste here who don't really have the imagination to think about anything other than, well, we'll just kind of suck up to America and that's what we're going to do, and this is what we've always done, this is how it works.

8:55 And that's that. To an extent of having to bend over backwards and course-correct quite rapidly on various things that were said in opposition, the foreign secretary calling Trump all manner of names, really, and now like doubling down, oh, it's fine. We sat down and had a nice, you know, chicken dinner or whatever it was together.

9:09 It was like, okay, fine. Now, look, on one level, like this isn't stupid, right? It's not actually ridiculous for the country in the position Britain is in to think, well, you know, nobody really likes it, so you've got to go and find someone to cling on to because you can't really do very much yourself.

9:23 So it's not actually stupid to do this. The bit where it starts to look really dim is when you start throwing in, oh, well, okay, this just means we're gonna do whatever US big tech wants, we're just gonna go all out for data centers. Because in domestic terms, domestic economic terms, this doesn't make sense, right?

9:38 The numbers just do not work for Britain at all here. I mean, in October, November last year, it must be November after the investment summit that Rachel Reeves had caught, and it's got a bit of a fanfare around that. And they were gonna get Blackstone to invest 10 billion pounds, I think it was, up in the northeast of England on a new data centre there, a vast great thing, you know, on these hyperscale data centers.

9:58 And it was like, oh yeah, this is gonna bring growth and jobs. And it's like, yeah, how many jobs? It was 4,000, they estimated. It was about 1.25 million pounds a job, right? In terms of the amount of money that's going into this thing, what you actually get out the other side in terms of what governments would usually compare about, which is actually what does it do for GDP and do people get jobs out of it?

10:18 It's nothing. And it's predictably nothing because these are huge capital-intensive investments. You spend all this money on the banks' servers, you don't have that many people actually looking after them, and all the money flows out back to whoever owns it, and they're not here, they're somewhere else.

10:31 In this case, they're in the US. I mean, so so it's domestically, this does not make sense. And you start having this government becomes obsessed by it. And the other bit that follows on from that is that you get the distinct impression, not just a distinct impression, it's pretty clear that up until very recently, the resource implications of doing some of this stuff have not really been thought about too carefully.

10:50 Like other developed economies, demand for electricity in particular has been going up fairly substantially in the UK after a long period of flatlining or even falling, actually is what you've seen over the last few years, yeah, relative efficiency improvements. The switch to electric vehicles, that's increased use of computing power in the home.

11:06 There's a whole stack of reasons why this is going on. They then start lumping in on a grid that is already creaking, a whole load of data centers. They then start saying, okay, there's a country that's not built any new reservoirs, thank you, privatization, since the early 1990s, despite significant population growth.

11:20 And start saying, okay, we're going to stick a data center in some of the most water-constrained parts of the entire country, which is like in Oxfordshire, where they're going to build one of these things. It doesn't make sense, right? It starts to run you into serious local objections. It starts to run to you and run you into serious problems with your infrastructure, which isn't there, and it doesn't actually produce the GDP and the jobs that you claim you want out the other side.

11:41 I know there's been a lot of discussion in recent years about the water system in the UK in particular and the effects of privatization, right? There's all this like, what sewage basically in the water system and in the rivers and all this kind of stuff, not to mention the price that people pay for a system that really hasn't kept up or isn't delivering.

11:57 On that point about the data centers, I remember they were talking about putting data centers in the greenbelt around London. Obviously, there's this talk of data centers in the north and the northeast and what that is going to look like. I know that the Starmer government has been talking about creating AI growth zones where there will be streamlined data center approvals.

12:14 What is the public making of this? Because I feel like I've heard some rumblings about people pushing back against it already, communities that are not okay with this in a way that we've heard in many other parts of the world too.

12:24 You're starting to see some of that happen already, even before the stack of announcements. You're exactly right. AI growth zones, they're calling them. Basically, where you sort of liberalize and remove and deregulate the controls on how you can build stuff and what you can build. The first one of these is located near Abingdon in Oxfordshire, so it's quite close to sort of Oxford and the university and this sort of thing.

12:42 That's kind of why it's a prime location for it on paper. In practice, this is somewhere that has had severe water shortages for a long period of time. It's also the site for a proposed new reservoir just down the road. And of course, that is a reservoir that is being built with the expectation it will supply the local population who are otherwise being suffering from various droughts and water shortages for a significant period of time.

13:03 But if you then stick a whacking great data center, you know, which is 30,000, 40,000 household equivalent water usage, you'll suddenly your reservoir isn't actually going to do the job that you planned for it. So there have been local protests there, understandably, right? I don't think these people are wrong to say, why are you putting this thing here?

13:19 You can start us make a case to locate data centers elsewhere if you want. You can start us to make better cases than jamming everything in down in the southeast of the country around a few favoured locations, which is what Rachel Ree's big speech and announcement a couple of weeks ago was all about.

13:32 I mean, this is the desperation, right? This is pure Whitehall thinking, treasury brain. It's a reversion to the most conservative parts of the British state where you go, we're kind of stuck. What generates growth? Oh, I know, we're going to expand Heathrow Airport and build more stuff around Cambridge and Oxford.

13:47 And they they do this for years. But just about every Chancellor of the Exchequer, equivalent to the Treasury Secretary, pops up to say, we're going to build a new Silicon Valley around Oxford and Cambridge. And you go back about 30 years now and find them all doing this, and it never happens because it's not going to happen.

14:01 But Labour's doing another round of this, but it has serious material consequences. If you actually talk about building data centres like this, this has resource consequences for everybody else that's living there. So those protests are starting to happen. The Financial Times had a good report, I think, just before Christmas, around what's happening in Oxfordshire.

14:17 It's localized at the minute and it's phrased around a sort of classic of light living game. We don't want a big new thing built, which is actually not unreasonable objections, by the way. I mean, I think it's a perfectly valid thing to say. Whether that starts to turn into a more general understanding of the problem at a national level, that we need to at the very least have some consideration about what is the purpose of building all these data centers?

14:36 Why are we insisting on this computing power? What are we going to do with it? And that sort of isn't happening. Because it just disappears into going like we'll get growth. Well, the actual consequences for growth in Britain or building a data center are not that great. It's quite nice for profits or somewhere else.

14:48 It's not necessarily going to do much with growth here. So you need to think a bit more sophisticatedly about what is it that you're doing with these things. Do we actually need to end up with host pipe bands and droughts across Southeast England because you want slightly faster access to cat videos?

15:01 There is a basic problem about us not really thinking seriously about what we're doing with all these computers we're insisting on building.

15:07 Just kind of jumping onto the bandwagon because that's what the US tech industry in particular is interested in right now, right? You know, and you can even look across to Ireland and see the consequences of building so many of these data centers and when they become big suck on energy and water, the consequences that that can have, right?

15:22 Like it's very much on the doorstep. You mentioned earlier how the government was very focused on like what these tech companies want and serving them because they see this as an opportunity to try to promote growth and things like that. And it really stood out to me that very soon after the UK election last year, I remember it was, uh I believe an executive at Google was speaking in the UK and kind of said, like, if the UK doesn't build more data centers and reform copyright, then it is going to be left behind on the AI race or the AI opportunity or whatever.

15:51 And then, like, very soon after, it seemed like these very policies were being adopted by the government, rolled out by the government, been talking about data centers, but Keir Starmer has this, I think it's like 50-point plan to expand the AI economy in the UK. And part of that exactly is to reform copyright so that these companies can train on all this copyrighted material and get away with it.

16:12 And it's just wild to see everything, it seems, can be sacrificed or will be sacrificed for AI of all things.

16:19 Yeah, exactly. And and it basically given a positive count of what's happened here, right? And again, I think it's back to that sort of desperation around it. The announcement, I forget which industry figure it was, but it was deliberately an industry figure who went off to do a quick report on what uh Britain needs to do to become an AI superpower.

16:32 And it's like a list of basically 50 industry demands, mostly. I mean, some better, some worse, but it's like that's where it lands. And Starmer just pops and goes, okay, we accept everything, that's it. Because they need to look like they're doing something. They're very keen to gesticulate like this.

16:43 They have to sort of do the funny dance. You know, we send Prince Charles off to like Saudi Arabia to do the sword dance, and then you sign a big arms deal or something. It's a similar thing going on with this, right? You've got to do the funny dance so that US big tech smiles benignly on you and everything's going to be fine.

16:56 I mean, the slightly more serious part of this, two bits actually. One is the shift in what's happened with AI policy in Britain. Like you go from Rishi Sunight where he says, oh, AI safety, let's have a big AI safety conference, right, back in the day. Now it's like, we're not even going to sign the Paris Agreement.

17:09 You know, this is forget it, it's gone. Exactly tracking the way US Big Tech has gone in this and the way the Trump administration is going.

17:15 Yeah, and I believe I've read that even the Starmer government was saying that they were going to bring in new regulations around AI, and that has kind of like all been delayed since Trump came to power, right?

17:24 So it's all just part, I mean, it's not going to happen. They want it to be the Wild West. And they think they're being clever. You know, you're you're right about Ireland, where actually there's now a serious public pushback and policy pushback, and governments concerned about it. It's like we can't just keep on building data centres.

17:37 The projections are absolutely crackers. Yeah, but like next year, a third of all the electricity in Ireland's going to these bloody things. So there's a kind of real effort to stop. Which, if you're in Britain, you're like, that's a golden opportunity because they all come to the next door sort of rainy island instead, right?

17:50 And it's all going to be great. The idea that there might be reasons why Ireland is not so keen on these things anymore doesn't seem to enter as like this would therefore be something that we might also be not so keen on these things. But the other part is the sort of the geopolitical bit of it, which gets us back to post-Brexit Britain.

18:05 And this is where like the Starmer government isn't doing anything different to what any other government would do. Like had the Tories miraculously won, they'd be doing basically the same things. And which is that you need to go to Trump and you need to get a trade deal or something as fast as possible, because you need to look like you're doing something.

18:17 Maybe not a complete trade deal. But if you look at what Rachel Reeves, the Chancellor of the Exchequer, has been talking about, where she says, we can do business with Trump. We think there's a deal around data in particular. And you can start to see what the offer looks like. Like, for instance, getting rid of the fairly minimal digital services tax that the last government actually introduced, which is about what, 2% of sales revenues with mostly US big tech, raising more money than the Treasury predicted.

18:40 It's about 700 million pounds a year. So it's not colossal, but it's not nothing. And it really irritates US big tech. They see it as a bit of an affront that they have to pay this thing. So if you want to deal with Trump, that's gonna go. And then there's a stack of other non-data related things. Can we get cheap liquefied natural gas from the US because the North Sea is kind of running out?

18:56 So you've got this kind of desperation, and part of the desperation stakes is what can you do to just roll out the red carpet, get rid of any sort of even small wrinkles like this digital services tax? What can we do to get rid of that? And then hopefully we'll get some Trump will smile benignly on his muscle, graces with his presence or something like this, and we'll get a deal out of it.

19:14 I mean, it's deeply institutionally pathetic, right? The whole sort of Brexit thing about yes, it's gonna be Britain alone, we're gonna carve our own way in the world. No, it's not. You're gonna be even more of a laptop than you were already, right? That's what this starts to look like. The entire thing is playing out like that.

19:29 So what you see around the data economy, what US Big Tech says it wants, is what we want to do. There's no other thought there. There's nothing about perhaps there are different business models and like just make the biggest data centers you can and run the maddest sort of model you can, in the most inefficient way you can, by the way, as DeepSeek has just demonstrated.

19:46 There's no variation from that. There's no sophistication around this, it's just chuck everything at this and hope for the best.

19:51 Over here in Canada, we are also familiar with the focus on the digital services tax. Donald Trump has like explicitly called it out, and even before, under Biden administration, the ambassador and the diplomats were really focused on getting rid of this digital services tax and making sure it's not there.

20:06 One of the reasons I've actually been following what's been happening in the UK quite a lot is you might be familiar, but Mark Carney, the former governor of the Bank of England, also former governor of the Bank of Canada, is running for the leadership of the Liberal Party. And a lot of what he is saying in the leadership race sounds a lot like Cure Starmer, going after AI, going for growth and all this kind of stuff.

20:27 I was like, oh my god, he's bringing Starmerism to Canada. This is gonna be terrible.

20:32 Trust me, I guess you don't want that. And also, it's like, as we said, Mark Carney was Mr. Green before now, to his credit, to be honest, he kind of saw the fact that if you're running a central bank, it has consequences if like climate change is in fact, you know, disrupting economic activity. So he was ahead of the curve on this.

20:47 But he was Mr. Green. Fairly obviously, if you go and build a load of very, very resource-intensive data centers, this is, as we're finding out, fairly dramatic challenges to whatever projections you have for decarbonisation. I mean, it throws into reverse the US experience. That is not really entered as a consideration in Britain yet, but I can see it will do because once you start say, okay, if you're serious about building a load of these things, it's a system under strain.

21:08 The electricity system is already creaking here. And then you say you want to decarbonize, and then this isn't going to work. It's not going to add help.

21:14 You mentioned there that the Starmer government has taken this really like conservative economic policy, conservative turn. And I think for a lot of people listening, they would be surprised to hear that about a Labour Party, right? You know, you kind of expect that a Labour Party in the UK is going to come to power, is going to be doing like much more progressive things, but it feels like it's just this kind of wishy-washy conservatism that this ostensibly sort of center-left party is engaging in.

21:39 W what describes the politics that the Labour Party has chosen to like embrace under the Starmer government and why it's doing that?

21:46 There's this sort of decay and a steady descent, not even that steady, uh, of Starmer and what he says he's going to do, which is he's elected in 2020 as leader of the Labour Party after the general election, which Jeremy Corbyn was defeated pretty heavily. Although, ironically, as it turns Out Jeremy Corbyn in 2019 won more votes than Starmer.

22:03 Lost, but won more votes than Starmer uh won with in 2024. Peculiar electoral system we have operates like this.

22:10 Yeah, I I understand the issues with that system from Canada, unfortunately.

22:14 Oh yeah, yeah, of course. No, it's exactly yeah, no, it's just completely insane sort of outcomes you end up with. But okay, here we all are. Starmer, this not especially popular prime minister who's made himself increasingly unpopular uh since arriving in office. But his course since getting elected Labour leader on firstly in 2020, of the promise of doing sort of Corbinism without Corbyn, will just smooth some of the rough edges off, as they were perceived by various Labour's members, and then steadily he's just moved further and further away from that.

22:39 There's gradually this process of ditching lots and lots of stuff, which has accelerated once he's in office. Rachel Reeves' first budget as Chancellor, which she weirdly delayed on for months and months, government just did nothing for about three, four months, and then turns around and whacks up taxes and increases public spending in various parts of the public sector.

22:57 The tax increase mostly falls on small businesses, which is politically stupid and I think will work out economically pretty daft as well. Like this will have employment consequences. And the payments to the public sector aren't really big enough to seriously reverse austerity. It kind of calls a halt, it's a bit more money, but it's not actually going to make much difference to people.

23:13 So it's a mess. And then what you have coming out of this is a sort of mini crisis around government bond rates, like the cost of government borrowing started to rise. This exposure that Britain has for a very long period of time to a real risk of the dreaded so-called bond vigilantes is actually a real thing when you run a massive current account deficit, which we do, when you have a big government deficit, which we have, right?

23:33 You can stack these things up, it's a problem. That started to emerge ahead of Christmas and cause one part of the panic along with the weak growth figures. And then flipping on the other side is like it's just we have to suck up to America. So you put this together, you get this real reversion to the most sort of basic, small c conservative default setting of the British state, in particular Treasury, it's finance ministry, very, very powerful finance ministry, which is always something like growth is what happens in the southeast of England.

23:58 So if we're doing anything, we should do it there. So we talk about Silicon Valley appearing in Oxford and Cambridge, and we talk about expanding London, Heathrow Airport, and rest of the country, whatever, do your own thing. And the other bit is like, oh, and we really, really, really have to cling as closely as possible to Washington, New York, and that's it.

24:12 And you don't deviate from that. And that basically determines the shape of this government from this point onwards. The real difficulty, this is moving away from data and digital stuff, is that that's sort of fine if you have Joe Biden, right? He's gonna try and maintain what American governments have done since the end of the Second World War.

24:27 It's not so easy if you have Donald Trump, who very much is not. In fact, he's sending his vice president over to Munich to say, hey, we don't like you guys and we're not gonna look after you anymore. I summarise his speech. You know, result is total panic across Europe of which Britain is part, which flings wide open, or at least it ought to throw wide open, a consideration of what it is we think we're all doing, right?

24:45 Because what is Britain's purpose in all this? The answer from the Labour Party is, by the way, is we are going to be the number one cats poor in America still, and we're gonna do that by aggressively remilitarising. We're gonna drive up military spending, we're going to get rid of every regulation we can think of to allow US big tech to do whatever it wants here.

25:01 That's that's our setting. I don't believe for a second that would actually be popular if it was actually offered to people as a choice in the election. This is not something people would vote for. But more generally than that, it's hard to see it even working in its own terms, right? We do not have an economy that would easily accommodate a 5% of GDP uh budget for the military.

25:19 It's like everything is deeply strained at this point. So it really comes down to like, what are you going to disastrously cut? I mean, maybe just close all the schools in the country, you know, something along these lines. That's that would get you there. It's not gonna happen. And it's gonna happen without serious uh public upset.

25:33 To the extent that people in the Labour Party, Labour right especially, are maintaining this kind of fantasy. It's okay, we'll just be airstripp one. It's hard to see politically how you make that work. I mean, that seems sad, Labour aren't gonna win the next election and potentially lose quite badly.

25:45 I think all really important points, right? Especially, you know, I feel like in Canada, we maybe have woken up to this a little bit early because before Trump was even president, he was already going after Canada. But there's a big reconsideration, I think, happening in Canada right now as to like what our relationship with the United States actually is after being its closest trading partner for decades or longer than that, right?

26:07 And it feels from this side of the pond that Europe was a bit later, maybe waking up to what is going on there. But it feels like, especially after J.D. Vance's speech in Munich and recently what has been happening with Donald Trump and Russia and Ukraine, Europe has really been woken up to like, okay, the United States has changed meaningfully, and this means that we need to reconsider our place.

26:27 And so, like, if the UK is saying we're still gonna cling on to America, it feels like that is a really bad bet.

26:33 The sort of deeper thought, in as much as people think about these things seriously, if you go down the road to Westminster and to Whitehall on this, the deeper thought is something like, yeah, Europe will flap around for a bit, but ultimately just fall in behind the US. Germany's a classic case in point, France actually does even more so the same thing.

26:47 It makes a noise, it makes a bit of a row, but basically falls in behind the US, and that's been the case for decades. Fairly extreme examples like the Iraq War was there a serious breach, and even that was pretty rapidly close off in the end. So it'll make a noise, it'll be a bit of fuss, but then everybody will fall in.

27:01 And if they're going to fall in, we want to be head of that particular queue. So we're going to position ourselves in the expectation the rest of Europe will basically come in behind us. I don't think that's completely stupid, bet. Frankly, the people running Europe are basically pretty craven on these things.

27:12 Which is getting to the point of producing quite a backlash, right? At least part of what is driving, notably the radical right in Europe is something of a backlash to this, in a very perverse way, because I don't doubt for a second that these people very happily sign up to supporting a Trump administration, but nonetheless, it's sort of demands for sovereignty and positions in the world and this sort of thing are in a very confused way part of what's going on there.

27:33 So it's not a completely nonsensical sort of positioning to take. And it is a gamble, but it's a gamble that to me feels like, yeah, it's not a bad bet that Europe in the end will prove to be pretty cowardly about what it's doing with the US, like given the opportunity to do something else, or sort of forced to do something else, it will try quite hard not to do something else.

27:52 Fair enough. If they just want to be economically dependent on a United States that is increasingly lashing out, then I guess they can do that and hope it works and plays out, right? Which is not to say that Canada won't also be very dependent on the United States going forward. It absolutely will be.

28:04 But I wanted to pivot to this bigger question, right? We've been talking about what is going on in the UK and its kind of embrace of this AI agenda and desire to be close to the Trump administration. And you've alluded to this in some of your answers, but I feel like there have also been a number of stories in recent years about how US growth is so much better than what is happening in Europe or the UK or Canada, other Western countries, you know, that the stock market and share prices are doing so much better in the US.

28:31 I feel like on the one hand, that is often positioned as like, okay, these countries have very backward economies and need to deregulate or do whatever in order to try to catch up to the United States because it's doing so much better. But I feel like often in that conversation is not this recognition that basically all of these companies that are some of the biggest companies in the world and this like sector of the digital economy and these new high technologies have basically been dominated by the United States.

28:56 And as you said, even when it sets up data centers or offices in other countries, the ultimate benefits of that end up going back to the United States. So I guess my question is like, what is the consequence of having allowed the United States to dominate this digital technology industry for the past three decades, allowing its tech companies to kind of dominate the digital markets, the internet economy in Europe and the UK and Canada and these other countries?

29:20 What economic effect does it have on those countries that have become dominated in this way?

29:25 I mean, Mario Draghi, the EU bigwig in the European Commission, and his recent report on productivity and competitiveness in Europe basically lays this out in fairly excruciating detail. And he's not wrong. There is something that's very significant happening to what is, if you add up all the European economies, the largest kind of single market on the planet, this ought to be a big, effective trading block at the very least.

29:45 And it's not acting like that at all. And it has sort of bumbled along for quite some period of time with relatively low rates of growth. I mean, notably getting worse after 2022 and the energy price shock occasioned by Russia's invasion of Ukraine. Which, by the way, is the key to this story, because there's a version, a kind of apologetic version of why is the US doing really well.

30:02 And it's like, yeah, because they're so clever and they have loads of tech, and that's like where growth is. And it's actually, well, think about big data now, increasingly, is that this is a game about scale. You have to have scale of the data you've got, which if you have a global presence, you can get from all over the place.

30:14 So you've dominated that and you got that and no one else can intrude. Facebook has been there almost 20 years, and it's very difficult to have a second Facebook, at least in the English-speaking world, right? That's what it's colonized on one side. On the other side, for 10 years now, more than 10 years, fracking has been a provider of cheap energy in the US, and data is increasingly an energy issue.

30:32 You just have to have loads and loads of energy along with other resources, but primarily on a day-to-day basis, it's energy, and it has to be cheap to get these things to run at scale so that you maintain your advantage. And that's what's driving this. If you want to talk about US growth, there's no great mystery to it.

30:44 There isn't some clever thing that's happening, is it if you have a loss of cheap energy, cheap in the immediate cost sense, it's bad for the environment, of course, because it's fossil fuels. But if you're doing that, then you're going to get more growth. And then a few other things. You know, US consumers have been happier to spend after coronavirus than than consumers in Europe as a rule.

31:00 So that's immediately a bit of a list to your domestic economy. But if you have that cheap energy and Europe does not, like, lo and behold, in an increasingly extractive economy, which is what we're living in, for all the parade of like innovation or whatever we're supposed to have, it's it's not true.

31:13 This isn't what's happening. Data economy is fundamentally extractive. Then of course the people have the monopoly or near monopoly on getting data and access to very large amounts of cheap energy, certainly cheaper energy than other people, are going to win. And then you just win and you keep on winning.

31:27 A smarter response to this might be thinking like, okay, maybe there are other parts of the economy you can go to where the US isn't so dominant. I mean, if you look at what China's done since what, made in China 2025, a large part of that steer into renewables has been doing this. A clear identification that this is a growth area, both for the domestic economy they want to see happen and potentially to the increasingly to the rest of the world.

31:47 If you get into renewables, electric vehicles, this is a space where the US isn't, and you can steal a march on actually not just US, also European car manufacturers, also Japanese car manufacturers. And you get there and you did that, but you had to have done that 10 years ago. There are things that Europe could potentially do where you think a bit more seriously about what are industries that are not this thing.

32:04 And it's really not very clear. Because if you look at the scale, when when Donald Trump pops up and says, oh, we're going to spend $500 billion on Stargate, you know, the big AI plan, along with SoftBank, what does the European Union bring that even remotely compete? There's nothing. There's nothing it competes with that.

32:18 So what's the point? You know, so why would you bother? Why not do something different? That thought, again, just doesn't seem to have entered. And some of it I suspect is just that if you live in an American-dominated world where broadly speaking, American growth was good for you for a long period of time, right?

32:31 That is the pattern in the 60s and 70s. America grows, and that means that West Germany does better, Japan does better. Carries on all the way through to the 2000s. America grows, and broadly speaking, this helps reinforce uh Chinese growth, and that means you get a whole load of cheap stuff from China and growth everywhere happens, and your financial systems integrate into the US one increasingly closely, and everyone does okay.

32:50 What's happening now is you're getting American growth, and that starts to look like actually negative consequences for growth if you're in Europe and you just have to depend on US big tech. You're spending a lot of time footling around on Facebook or Twitter or Google or whatever. Any revenues that's generating is going somewhere else.

33:05 So that is not any longer this positive sum game for Europe. American growth does not easily turn into a positive sum game for Europe. That's what we've seen the last probably 10 years now, nearly accelerated since 2022.

33:16 You know, on the point about China, I've read one of the reasons that they have gone so much into renewables is because they don't have the same degree of like fossil fuel reserves that they can make use of. So the more and more they can reduce their dependence on fossil fuels, the better it is for them to not be dependent on this economy or energy source that is often controlled by the United States or American allies or things like that, right?

33:37 Which is really fascinating. But if the benefits of this arrangement with the United States are not accruing to like Europe and the UK any longer, then does it make sense for the strategy to still be, okay, we need to pursue the same AI economy or the same kind of approaches to technology? Because I feel like even in the past month or so, seeing how, yeah, China is pursuing AI as well, but seems to be doing so in a slightly different way that allows something like Deep Seek's more efficient model to emerge is suggesting that, like, yeah, there's a way to approach these technologies, but to think outside the like American box of how to do that, so that maybe you can do it in a different way and

34:17 try to leapfrog or do something different that gives you an advantage. But it doesn't really seem that Europe is thinking in that way or trying to approach it in that way, and it's just trying to be like, okay, what's the United States doing? How can we do our version of that, or how can we get Google to set up a new office over here and hire some people?

34:34 I guess what is the consequence of pursuing it in that direction rather than really trying to strike out and do something fundamentally different?

34:40 There's a couple here. One of them is uh it looks to me like there's um we didn't we saw something of this panic with with the arrival of DeepSeek and its claims about how efficient it was. I mean, you could see what happened to US tech stocks. Nvidia in particular is one that really leapt out. But there is an issue there, and it feels a bit like 2008, where you basically have a problem of everybody has the same business model.

34:58 You have these vast companies all kind of doing the same thing in the same way, pursuing the same sort of way of making money. And that's what you have with US big tech. Everyone's doing more or less the same thing. Get as much data as possible, run the analytics at scale, and that's how the world is going to be from now until forever.

35:12 And you start to, with AI, this starts to increase exponentially. But that means if there's a flaw in your business model of some sort, if somebody like DeepSeek can turn up and just do something a bit different, then everybody fails at once. So it seems that like there's a sort of risk built into having the data economy working like this and its dominant part of it, looking like a bunch of companies, all which are pretty similar, doing pretty similar things.

35:30 That just a little bit of chiseling and suddenly that's an entire 2008-style crash. That's a an obvious economic security and stability risk you'd have thought. The longer term bit, I think, is exactly as you say, is that if it is a game of scale, then, and this is utterly classic sort of economic problem.

35:45 If scale is what you need to compete and you can't get scale, you will not compete. And there's no point, there's no point you trying to do the same sort of thing. You have to do something different. And the fact that you do not have even the level of coordination in Europe necessary to think we have to do something different.

36:00 Not just AI, by the way. I think it's it's also gonna happen in like what is Europe's broad geopolitical positioning in all of this, right? You know, the fairly smart thing to do, but right now would be, I had a thought, go off and like make friends in China again and like and do it as rapidly as possible.

36:13 Will Europe in general be able to do this? Well, yeah, I wouldn't hold your breath waiting for that one. I think it would just flap about. There isn't the institutional imagination to get to that point where it's like, okay, do something different, encourage something different. That you just have these deeply sclerotic structures.

36:26 I mean, Deep Seek's really fascinating in a whole load of different ways. I mean, the the reports and the company structure is quite distinctive, even for Chinese tech. It's not worker-owned, it's not like Huawei or something notionally worker-owned, but it's it's much more, you know, they don't do the 996 or whatever working now as culture.

36:39 It's not hierarchical, everyone's supposed to encourage different ways of thinking, it's much more flat sort of structure. That's quite an interesting thing in itself. This is a demonstration that not only is it like innovation can happen anywhere and quite serious disruptive innovation, it's also you can have innovative company forms that happen everywhere.

36:54 Now, if you're sitting in Europe, you ought to be sitting there going, like, well, this is really interesting because you could do something like you don't have to have Google the second or NVIDIA Mark II. This doesn't have to be the thing you're doing. You could do something differently here. It isn't happening.

37:08 Or if it is happening, it's happening on a smaller scale without the sort of institutional support that you might want to balloon this to scale this up in any any reasonable way. I mean, the one that, just to finish the point, I suppose, we have had clear technological successes. The most obvious one in Britain is art by a very, very long way, right?

37:22 This is a bona fide, absolute world-leading company in tech, which we promptly kind of sold to soft bank and then have just allowed to go and effectively become an American company. And that wasn't even a consideration about how you might use this as part of, for example, industrial strategy around semiconductors, which wouldn't be on the fabrication side, but you could do something on the design side.

37:38 And you could integrate that into your AI strategy if you had a serious one, but we don't. You know, even when you have something, and probably Britain is worse than this, even if you have something, even in simple national capitalist terms, you could do something with, it's just forget it and then it's sold and forget about all that.

37:53 The only way to understand this is sort of institutional stupidity, right? There's just an inability to think, to get outside of the patterns that have always been there because all your incentives are to not really deviate from it. Even though everyone can recognize the problem, you're just stuck behaving like this.

38:05 I have two more aspects of this that I wanted to ask you about. The first is that when we think about these American tech companies in particular, it often seems their valuations on the stock market are often kind of far above the multiples that they actually deliver in revenue, because there's this belief that they are going to grow a lot faster than, say, traditional companies or or whatnot, right?

38:25 That are not in this kind of tech sector. And I wonder if that benefits the United States to a particular degree to have so many of those companies within its jurisdiction. And then the other piece of that is on top of these questions about growth and GDP figures, I feel like we often hear that productivity is better in the United States and worse in other places.

38:43 And I wonder if that also plays into the fact that you have these companies that produce so much revenue per employee because of the unique way that they are structured and because of their kind of global size and how you don't always need as many employees to kind of generate that revenue with those software models.

38:58 So I wonder if that is also beneficial to the United States or if we overplay the benefits that that actually provides.

39:04 Two parts to that, I suppose. One is that productivity is quite a slippery concept as you tend to think about in sort of conventional economics in particular, although it's difficult in any setting of things. It gets immediately linked in people's heads with like doing something clever. And actually, you may not be doing something clever, you just might be doing something potentially for free.

39:21 Like if you steal things from somewhere, you can become very productive very rapidly. If you steal things and get away with it, you can. So if you're running a US big tech corporation, you have a lot of capital investment for sure. But the capital investment is basically directed towards extracting value from the rest of the world in the form of data.

39:35 And you do that, and then you kind of sell advertising space in the basis of it, and that's how you actually monetize this stuff. But that's your productivity. And mostly it's about you found a near-free resource that you're grabbing, right? Which is all your users and their eyeballs and everything that they're doing.

39:47 And you just take that and you produce productive on the back end of it. That's the extractive element of it, and that's a zero sum bit because it means also actually if value is being taken by you, it's not like the ideal form of this where you're trading something and some of that value goes back. I mean, okay, we all get to use Facebook or whatever, fine.

40:02 There's some notional value attached to this, increasingly less and less, I would say. But it's there, it's just not an equal exchange, right? Because there's clearly more that Facebook gets out of being able to take a large number of users, aggregate them, analyze what they're doing, and sell resources, sell this advertising space and all the other services it provides to where it actually makes its money out of the back end of it.

40:21 But this is extractive. You're taking something and not really replacing it on the other side. So that's where the productivity starts to emerge in the US. The broader problem is also like the US economy itself is all developed countries have this problem. It is incredibly skewed in the overall statistics towards a few, as you said, large companies at the top, large and notionally very productive companies right at the top, with an incredible long tail of not very productive companies and work happening behind it.

40:43 And a lot of that won't ever be productive in the sense that normally you'd count it if you're doing sort of conventional economics. It's like, you know, I go to my local pub, it's not particularly productive, nor would I want it to be very productive, right? I don't want to get twice as drunk in half the time, right?

40:57 That's not really what I want out of this thing. Same goes for a great chunk of the economy we actually live in, right? Just normal functioning stuff shouldn't really be very productive. So that's one part of it. But there's also an issue, I think, in the US way if you look at the state of infrastructure across much of the country.

41:09 I mean, this is where Biden had some, the people around him at least, had some parts of the analysis right. It's like infrastructure's kind of built creek, right? And you've been relying very heavily on a few big companies generating lots of stuff and the rest of the economy is falling apart. So they had some ideas about how you might turn this around.

41:22 Didn't really work. Don't think Trump's going to do this either, but you know, that's that's what it is. The distortion effect of looking at the US economy in the aggregate is you see a lot of these top performers and then miss a whole load of things that are happening underneath. That's very similar to what's happening in Europe, but I think it's less pronounced, actually, partly because you don't have the top performers so far into the distance.

41:38 You certainly see it in Britain, where you have, you know, a few multinationals are very productive on paper. I think of some of the very productive car factories and things that you have here, facing serious competition around EVs and stuff, but nonetheless very productive in producing internal combustion engines.

41:50 Very long tail of things that are happening that aren't anything like as productive. And increasingly in Britain, what you find is that those less productive parts of the economy are the ones that are starting to dominate, and this is why you get the overall problem with a lack of productivity growth.

42:02 That's a kind of general feature of developed capitalism, which America's relative success in a sector that has clearly become critical to how much of the world functions is disguising as sort of serious economic weaknesses underneath, I'd say.

42:14 That makes a lot of sense, especially when you outline it like that. I have one final question for you, and that is we have talked about all these issues with the UK's AI strategy and what this means more broadly for Europe, right? This kind of economic relationship that it has developed with the United States for so long and how that has developed, especially in the past decade.

42:31 Is there something that the UK or Europe more broadly should be doing instead to push back against the dominance of these tech companies or to develop a better economy or economic model that is really not in this kind of thinking that currently guides economic policies in these countries?

42:45 But one that seems like a reasonably sensible, relatively low-cost thing to start doing is to be a bit more serious about open source, about free access to knowledge, about removing, not bending over backwards to allow big US companies to have whatever they want, but thinking more seriously about how you're going to promote open source modes of working, how you're going to liberalize in the best sense what your tech sector is doing and start thinking about what are the small companies that you can support to make this happen?

43:09 What are the new business models? What are the new more collaborative business models you can start to do to make some of this stuff happen? How can you make better use of public data? Not like in the case of the NHS, which has a vastly, vastly valuable data resource, not just hand it all over to Palindier who ever turns up with like five quid or whatever they pay for this stuff, actually think seriously about how you mobilize this as a public resource, how you have ways for researchers to use it.

43:31 In other words, upend most of what we think about in the data economy. It should be privatized and it should be private companies that are delivering the innovation. And that what you really want is the most rapid possible route to enable that kind of privatization of data and extraction to take place.

43:44 Flip it on its head and do something else, which ought to be fairly low cost, right? Because if you just say, Oh, we're going to change some of the legal structures around this, we're just going to make it a bit easier to set up a particular kind of cooperative business. That's actually cheap, right?

43:54 And that to me looks like where you're going to have the serious wins in the future. Let's do Google the second. To put make it European. It's like, Google's already there. You're not going to do this, right? It's going to sit there and it's going to be there for a long time. Presumably. So there's no point trying to outcompete on that basis.

44:08 That's where the win starts to appear. But it it would involve a wholesale change in like how European capital and European states think about uh how they relate to their economies.

44:20 And that's the real difficult part of this, of course, right? Is having that mind shift where not everything is just about maximizing GDP, but also thinking more broadly about the impacts. James, really great to get your insight on all this. Great to finally have you on the show. Thanks so much for taking the time.

44:33 Thank you very much for having me on. I'm glad we finally got here.

44:36 James Meadway is an economist and the host of the Macrodose podcast. Tech Won's Save Us is made in partnership with The Nation magazine and is hosted by me, Paris Marks. Production is by Eric Wickham. Tech Won's Save Us relies on the support of listeners like you to keep providing critical perspectives on the tech industry.

44:51 You can join hundreds of other supporters by going to patreon.com slash tech won't save us and making a pledge of your own. Thanks for listening and make sure to come back next week.